IRS regulations permit employers to allow hardship withdrawals from non-qualified pension plans when the employee has an immediate and heavy financial need and the withdrawal is necessary to satisfy the need. The IRS accepts the following circumstances as immediate and heavy financial needs:
1) medical expenses for the employee, spouse, and dependents in excess of 7.5% of adjusted
gross income
2) the purchase of the employee's principal residence, not including mortgage payments
3) payment of post-secondary education tuition and related educational fees and room and board expenses for the next twelve months for the employee, spouse, children or dependents
4) preventing foreclosure on or eviction from the employee's principal residence
It is within the discretion of each employer adopting a provision for hardship withdrawal to choose in which of the four circumstances enumerated above it will allow withdrawal. It is also within the employer's discretion to determine whether the employee may withdraw only their own contributions or whether they may withdraw employer contributions and earnings as well. Withdrawals cannot exceed the amount of the need.
The IRS does not allow withdrawal from money purchase qualified pension plans. SUNY adopted this type of plan effective January 1, 1990. Prior to that we had a non-qualified plan. Accordingly, our policy on hardship withdrawal must of necessity apply only to contributions made prior to January 1, 1990 and to earnings credited prior to January 1, 1990.
It is SUNY's policy that employer and employee contributions, as well as earnings, may be withdrawn only under the following circumstances:
1) medical expenses for
the employee, spouse, and dependents in excess of 7.5% of adjusted gross income
2) preventing foreclosure on or eviction from the employee's principal residence
The hardship withdrawal
provisions will be administered by the Optional Retirement Program carriers.
Employees will self-certify that they have an immediate and heavy financial
need due to one of the above two hardships listed above and that the withdrawal
is necessary to satisfy the need.